UK: Deloitte Weekly VAT News - Week Ended 11 November 2005

Last Updated: 23 November 2005
Article by Ron Nattrass

Intra-community sales of goods - A-G’s opinion

The A-G’s opinion in the case of EMAG Handel Eder OHG ("EMAG") suggests that in some circumstances, intermediate suppliers of goods transported from one EU Member State to another might find themselves liable to register for VAT in the country of their customers. The case itself concerned the sale of goods by an Italian company to an Austrian company which sold them to another Austrian company, EMAG. The goods were sent direct from Italy to EMAG. The AG ruled that the Austrian tax authorities were wrong to treat the sale by the Austrian company to EMAG as an intra-community, rather than as a domestic, transaction.

Insurance – outsourcing changes to be delayed?

It is rumoured that the changes to the VAT treatment of "outsourced" services related to insurance, which were the subject of an HMRC consultation after the ECJ’s judgment in the Arthur Andersen case earlier this year, might be delayed. HMRC had planned to make many such services subject to VAT from the beginning of 2006. It now seems possible that ministers might allow the changes to be brought into effect later (perhaps much later). It is expected that HMRC will make an announcement on this soon.

EU Council of Ministers considers VAT simplification and lower rates

The Council "took note of" a progress report on proposals intended to simplify the compliance obligations of businesses involved in cross-border trade. These include the proposals to change the rules for deciding where, and by whom, VAT should be paid on "business to business" supplies of services, the "place of supply" of "business to consumer" sales, arrangements for refunds to businesses of "foreign" VAT and the "one stop shop" scheme. These all remain priorities for the remainder of the UK presidency (until the end of the year) and for the Austrian presidency which succeeds it. The Council also looked at proposals for dealing with the EU’s rules on the lower rates of VAT that some countries allow, some of which are due to expire on 31 December. All these issues seem likely to feature on the agenda for the next meeting on 6 December.

Nurseries –hopes for VAT cost reduction dashed by High Court

Hopes that nurseries and similar organisations (including workplace childcare) might see a reduction in their VAT costs have been dashed by the High Court’s decision in the case of K&L Childcare Services Limited. The Tribunal had decided that the company’s supplies of staff to various childcare institutions were VAT-free but the High Court agreed with HMRC that the company’s charges were subject to VAT (which will be a cost to most of the institutions concerned).

VAT rate rise in Germany?

Rumours are circulating that the German VAT rate might be increased from 16% to 18%.

Predicting the weather is a lottery according to the Tribunal!

Not even Michael Fish could predict the exact temperature in six cities, according to evidence presented to the Tribunal in the case of The Great Weather Lottery. HMRC sought to impose betting tax and gross profits tax but the Tribunal decided that predicting the weather was not a game of skill. Would the Met Office agree?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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